1. Field of the Invention
The present invention relates generally to processing credit card transactions involving currency conversion, and in particular to determining the conversion rate at the time of authorization in order to provide a cardholder with the final price of the transaction in the cardholder's billing currency based upon a specific currency exchange rate that is developed by reference to a combination of merchant, merchant location, acquirer, gateway, value-added reseller, currency, card type, transaction type, and/or card issuer.
2. Description of the Related Art
In a credit card environment, a transaction takes place between a merchant and a cardholder. The merchant contracts with an acquiring bank for an account that permits the merchant to accept credit and debits cards (collectively referred to as “credit cards”) issued by a card association as a method of payment for sales completed by the merchant. The merchant's account is denominated in a settlement currency, which is typically the same as the legal currency in the jurisdiction where the merchant is located. Furthermore, the currency in which the merchant receives payment is generally the same as the settlement currency (e.g. a U.S. based merchant has a merchant account denominated in U.S. Dollars and receives payment in U.S. Dollars). If a merchant desires to have more than one settlement currency, it establishes multiple settlement accounts at an acquiring bank that can support this, each associated with a specific currency. In a conventional system, the merchant is typically only able to consummate credit card transactions in the settlement currency, and its customer can only view pricing and complete a transaction in the settlement currency. For readability, the term “local currency” is used below to refer to the currency in which the merchant receives settlement.
There is a variety of technology available to enable merchants to accept credit card payments. For example, the merchant may use a stand alone credit card processing terminal separate from the merchant's other business processes. Further, the merchant may use a credit card device integrated within another business application; for example in the case of a hotelier, a solution that is encompassed in a property management system that manages several aspects of the hotel's business. Additional integrated examples include but are not limited to gasoline pumps, electronic cash register (ECR) systems, and the like. The term Point-Of-Sale Device (POS device) is used below to generally describe these devices.
In many cases, the POS device may be connected directly to either an acquiring bank or third-party processor contracted to handle credit card processing functions on behalf of the acquiring bank. The acquirer or third-party processor (collectively, the “acquirer”), in turn is in communication with the card associations for the purpose of authorization and settlement of the credit card transactions. In other cases, the POS device may be connected to the acquirer via a “payment gateway” which is centrally-hosted by a third party and which has connectivity to multiple processors. In still other situations, typically when very large merchants are involved, numerous remote locations may connect to the corporate host central site, akin to an in-house gateway of sorts, for processing. In practice, numerous combinations of the above can and are deployed within the industry.
When the cardholder completes a transaction abroad, or more specifically where a transaction is consummated outside of the country where the issuing bank is located, the currency in which the transaction is denominated (i.e. the merchant's “local currency”) is often different than the currency in which the cardholder is billed (i.e. the currency of the card's issuing bank, or the “issuing currency”). Consequently, at some point the transaction amount must be converted from the local currency to the issuing currency so that that the issuing bank can provide a statement to the cardholder in the cardholder's issuing currency.
Conventionally, this conversion is not performed by the card associations at the time of the authorization, but rather occurs after the transaction has been authorized and “batched” (i.e.: submitted by the merchant for payment) during the general card association settlement process. Referring now to FIG. 1, assume that a cardholder 102 from the United Kingdom is visiting the United States and completes a transaction using a credit card denominated in British Pound Sterling Sterling. The cardholder presents the credit card to the merchant whose merchant account is denominated in United States Dollars. Assume also that US $150=£100 on the wholesale market. If the cardholder purchases an item for $150 from merchant 104, the transaction between the cardholder and the merchant will be both completed in and sent to the card association in U.S. dollars. The merchant then sends the transaction record to its acquirer 106, which is responsible for obtaining payment on the merchant's behalf. The acquirer 106 forwards to the card association 108 the transaction record, still denominated in U.S. dollars. The card association 108 determines that the issuing currency is British Pound Sterling, and converts the transaction into that currency using a wholesale rate established by the respective card associations. At this point in the settlement process, the card association conventionally applies a markup percentage, illustrated in FIG. 1 as a 1% markup, raising the converted transaction amount to £151. Next, when the card issuer 110 receives the transaction, it typically applies its own markup to the transaction, e.g., a 2% to 4% markup, which in this case raises the transaction amount to £103 if the markup is 2%. The new amount, as converted by the card associations and issuing bank and including the fees imposed by the card association and issuing bank, in this case £103, or US $4.50 more than the original purchase price, is then provided to the cardholder, typically on the cardholder's next billing statement. At some point in the future, the cardholder is presented with a statement that lists the final converted amount of the transaction in the issuing currency. Depending upon the specific business practices of the issuing bank, the exact manner in which the conversion was achieved (e.g., the actual conversion rate applied to the transaction and the specific fees imposed by the card association and issuing bank) is typically not clearly disclosed to the cardholder. Thus, in this conventional model, the card association 108 and the card issuer 110 receive a profit on the conversion markup, but the merchant and the acquirer do not. Furthermore, the cardholder is not able to determine the final amount of the transaction in his local currency at the time of the transaction, but rather will discover the amount of the transaction in the issuing currency only upon receiving his next billing statement. Further, even then he may not be able to determine the exact manner in which the final amount was calculated due to this lack of disclosure on the part of the card association and issuing banks. The cardholder does not have any opportunity to reject the conversion itself or choose some other institution or entity to provide the currency conversion.
In view of the foregoing, a need therefore exists for a foreign exchange payment system that allows a merchant to present a cardholder with the final price of a credit card transaction denominated in the cardholder's issuing currency at the time of the transaction. In addition, a need exists for a way to allow merchants, acquirers, processors, payment gateways and point-of-sale device providers and other participating parties in the transaction stream to facilitate a time-of-transaction currency conversion service without requiring broad changes to such parties' processing and accounting infrastructures.